The outlook for Spirit Airlines’ offer to sell to Frontier Airlines is threatening, as a prominent shareholder advisory company has overturned guidance on the combination of the two low-cost carriers and encouraged Spirit investors to decline the deal. It seems that it has been done.
Due to the bidding war, Spirit repeatedly postponed shareholder votes as it sought to gain support for Frontier Airlines’ transaction over a one-sided bid by JetBlue Airlines. Due to additional time, changing trading conditions and market dynamics, advisory firm Instituteal Shareholder Services changed its recommendations twice, most recently on Friday.
This update will take place a few days after the Frontier has stated that it has no plans to adjust its offers and has admitted that it remains “very far” to get the support it needs from Spirit shareholders. At the request of the frontier, Spirit has postponed the shareholder vote again this week to July 27. It was scheduled for Friday.
JetBlue’s offer is more valuable than Frontier’s offer, but Spirit and Frontier argue that regulators are unlikely to approve a sale to JetBlue. However, after considering the potential impact of regulatory delays, the ISS estimated that JetBlue’s offer was worth 11.5 to 19 percent higher than the Frontier’s offer.
Spirit management has also repeatedly argued that frontier contracts bring longer-term benefits to shareholders. The two airlines share a low-cost business model, and their combination will create a feasible and viable national budget airline. Insist.
However, frontier share price movements since Frontier and Spirit jointly announced a takeover plan in February suggest that investors are not convinced that the market is “on the brink of recovery.” Said the ISS. In the end, he concluded, “The proposal from JetBlue seems to represent a good alternative.”
Industry analysts generally agree that Spirit and Frontier are more complementary than Spirit and JetBlue, but combining the two airlines is not an easy task in any situation. The Biden administration is also broadly skeptical about the merger of large corporations, so both transactions are expected to be scrutinized.
